Risky+

Investment Rating

Expiry date
:
Expired
15 Nov 2018

Rating report

Based on the analysis performed and issues identified, we have assigned the Matic Network project a Risky+ rating. At the time of writing, a demo version of the project is already available, a likely indicator of the team’s serious intentions.

We draw attention to the fact that the project is currently vulnerable and dependent upon favorable business, financial, and economic conditions to meet commitments on the project’s deliverables. In the event of adverse business, financial, or economic conditions, the team is not likely to have the capacity to meet its commitments on the project. This outlook assesses the potential direction of the project; in determining a rating, consideration is given to any changes in economic and/or fundamental business conditions. This outlook is not necessarily a precursor of a rating change or future team actions.

Disclaimer: We would like to emphasize that the project is at a fairly early stage (currently there is no information available about the presale, private sale or ICO). ICO details and token metrics are not specified in the white paper or on the project website. We also understand that the smart contract code can be published only when token metrics are known, but nevertheless, we highlight its absence at the time of writing. The whitepaper consists mostly of technical details, not business information. The roadmap is not yet available. Therefore, it is not possible to draw conclusions regarding token economics, distribution scheme, use of proceeds, a bounty program, etc. On the project’s official GitHub profile, the smart contract code (a product integrated in the Ethereum testnet) is already available. However, as the timeline and all important milestones for the project are still unknown, we do not consider this a risk as of June 18, 2018. As of our report date, all token sale-related details are under legal and corporate advisory and will be released soon. As of the report date the team is working on a revised website featuring an updated whitepaper, roadmap, all information on the team and other details such as those regarding advisors, partners, etc. According to comments received from Sandeep Nailwal, the site will be launched on July 4th -5th.

Strengths of the project include:

A demo version already being available

The alpha version is expected soon

Potential to occupy a niche and solve a relevant industry problem (scalability/performance)

We would like to draw attention to these risks for the project:

A poor whitepaper with lack of business details – over-emphasis on the technical aspect.

No roadmap.

The team is not yet staffed.

No advisors or partners are yet announced.

ICO details are unavailable at the date of analysis and token price details make it difficult to access the real risk level of the project. Token and project economics are described very poorly; the developers need to specify in more detail expected compensation rates for token holders of and all other economically-relevant information.

Based on the analysis performed and taking into consideration all the risks associated with the Matic Network project as of June 2018, we assign the project a “Risky +” rating. This rating may need to be reassessed once the updated whitepaper and roadmap are released, on the achievement of milestones, successful testnets, and when a successful alpha version of the product is released.

Project and ICO information

Ticker: MTX

Token type: ERC20.

ERC20 is selected as Matic Network is fully compatible with Ethereum. The same token would be able to move between the Matic network and Ethereum, and any standard Ethereum wallet could be used to store and transfer tokens (according to information received from the team).

Matic Network is a blockchain scalability platform which provides secure, scalable and instant transactions using DPoS side chains and an adapted version of Plasma.

Current decentralized ecosystems lack user experience, usability and convenience. Decentralized transactions are slow, expensive and complex. Matic aims to change this by simplifying interaction between users and the decentralized world. The aim of the project is to make this technology so simple that anyone could use it without worrying about its complexity.

Matic strives to achieve a high degree of decentralization, involving trust-less and decentralized execution while ensuring near instant transfers, low fees and conducive economics for micro transactions.

Matic’s open source foundation intends to provide a Matic wallet, payment APIs and SDKs, products, identity solutions and other solutions enabling developers to design, implement and migrate DApps built on base platforms like Ethereum.

Currently there is no information available about the presale, private sale or ICO. In the official Telegram group it has been stated that the team is currently finalizing details regarding the token sales and taking expert opinion/advisory on legal, corporate and tokenomics fronts.

A legal entity has not been established yet, but according to information received from the team this will be announced shortly (according to information received from the team, on July 4th-5th).

KYC procedures are planned.

The above issues and the absence of marketing activity make it impossible to analyze potential market distribution for the services. However, given that the project already has a demo version and the solution looks promising, this should not significantly increase level of risk for potential investors.

Technical overview

The Matic Network brings massive scaling to Ethereum using DPoS side chains.

Ethereum was chosen as the first platform to showcase the scalability of the project, and the project already has a working implementation for Ethereum on the Kovan Testnet (a publicly accessible blockchain for Ethereum created and maintained by a consortium of Ethereum developers, to aid the Ethereum developer community). Matic also intends to launch an alpha version of the mainnet with working Dapps before the ICO (according to Medium.com).

Technical architecture

The Matic Network solves problems prevailing in the current blockchain ecosystem such as slow transactions, low transaction throughput, scalability, sizes of blockchains, multiple micropayment channels with other off-chain solutions, high transaction fees and poor usability by building a decentralized platform using an adapted version of the Plasma methodology that provides a solution featuring faster, extremely low cost transactions with finality on a mainchain.

CURRENT BLOCKCHAIN PROBLEM

MATIC’S SOLVATION

Slow transactions

Matic solves this problem by using a high throughput DPoS chain with a selected set of Delegates. It then uses a Proof of Stake layer to validate the blocks and publish periodic proofs (merkle roots) of the blocks produced by the Delegate layer to the Eth mainchain​. This helps in achieving a high level of decentralization while maintaining extremely fast block confirmation times.

Low transaction throughput

Matic solves this problem using a Delegate layer from its DPoS system to produce blocks. ​Delegates enable the system to produce blocks at a very fast rate. The system ensures decentralization using PoS checkpoints which are pushed to the mainchain (Ethereum as a first chain).

Scalability

Matic intends that the platform will facilitate easy addition of more side chains horizontally to increase total number of transactions on Matic.

Size of blockchain

For the Matic Network, the primary layer which provides decentralization may choose to incorporate only blocks of the Matic chain from the previous checkpoint to the next checkpoint. All previous transaction/block proofs are anyways submitted to the mainchain. This enables extremely low fidelity PoS nodes which can be run on very low cost machines with low storage. In future, the Matic network intends to enable mobile device-based PoS miners too.

Multiple micropayment channels with other off-chain solutions

The Matic network uses a state-based architecture on an EVM; this doesn’t require payment channels to be opened between two parties. Any valid Ethereum address is a valid Matic address and receivers do not need to be on the Matic chain to receive funds. They would only need to have a Matic wallet when they want to withdraw funds to the main chain or spend it in the Matic ecosystem.

High transaction fees

The Matic network enables low cost transactions by achieving economies of scale by doing large number of transactions on the Delegate layer, which ensures low cost, and then batching proofs of Matic blocks using the Merkle root of the blocks ​to the highly decentralized mainchain (for example, Ethereum) using a decentralized layer of PoS Stakers.

Poor usability

Matic is working on leading projects for mobile and web browser integration tools and is pioneering protocols in this domain. It intends to build a ubiquitous mobile/browser app which will act as a secured interaction layer for blockchain interactions. Prototypes are planned to be published soon.

Plasma is a proposed framework for incentivized and enforced execution of smart contracts, which is scalable to a significant amount of state updates per second (potentially billions) enabling the blockchain to represent a significant number of decentralized financial applications worldwide. These smart contracts are incentivized to continue operation autonomously via network transaction fees, which are ultimately reliant upon the underlying blockchain (e.g. Ethereum) to enforce transactional state transitions.

DPoS is an algorithm for achieving consensus in a decentralized environment, which is an alternative to consensus PoW and PoS. Briefly, the basic principle of DPoS is the division of voting and validating participants. As a result, network participants who have the right to vote in the system (coin holders) are not transaction validators. Thus, one subset of participants selects another subset, who in turn generate the blocks.

DPoS summary

Matic uses a dual strategy of Proof of Stake at the Checkpointing layer and Delegates at the Block Producer layer to achieve faster blocktimes while ensuring ​a high degree of decentralization by achieving finality on the main chains using checkpoints and fraud proofs.

DPoS is designed in such a way that it maintains a high frequency of new block generation and is capable of processing a large number of transactions per unit of time compared to other consensus algorithms that operate in a distributed environment without trust. DPoS is well suited for the design of open access systems where no user identification is required.

Summing up, these types of consensus are more suitable for building an ecosystem that includes both regular users (mobile customers) and companies (full nodes that can play the role of validators).

Description of services & their applicability

The Matic foundation is committed to providing a scalable, user friendly ecosystem for third party decentralized applications to thrive on. The Matic network foundation, like the Ethereum and other platform foundations will promote various Base-chain Dapps (like Ethereum-built Dapps currently, and NEO and EOS in future) to build and migrate their user-facing applications/transactions on the Matic network.

As stated on the project’s website, it will be easy to convert and exchange tokens, so customers can pay with any token, then they will be exchanged and forwarded for payment; Matic intends to use the 0x liquidity pool to convert tokens to other target tokens.

It will also award grants and funding to third party app developers to build various user cases:

Matic will provide an interface and payment APIs and SDKs for DApps, merchants and users to instantly accept or pay in crypto assets (e.g., ERC20 tokens or ETH itself).

The project’s code is publicly available via GitHub. Since the start of development of the project’s smart code, contributions to the GitHub master are as follows:

There is a small but regular amount of activity on GitHub; this may be due to the small team size.

According to information received from the team, current theoretical speeds are around 65,000+ transactions on a single chain. There can be multiple such chains. The team has already tested the system (internally) with 30k-40k transactions; these went through successfully. At the time of writing, the team has been conducting end-to-end load test to be posted on YouTube at the end of June..

With throughput and real-client use cases validated, the next steps will involve continuing to test the strength and security of the product and launching the mainnet.

Roadmap

The roadmap has not been released to date.

Market outlook

6.1 Market overview

As cryptocurrencies have become mainstream, and given that the initial design of cryptocurrencies was not intended for widespread use and adaptation, the following “trilemma” occurs: scalability, decentralization, and security.

For Bitcoin and Ethereum to compete with more mainstream systems like Visa and Paypal, they need to seriously step up their game when it comes to transaction times. While Paypal manages 193 transactions per second and Visa manages 1667 transactions per second, Ethereum & Bitcoin cannot run nearly as many (circa 20 transactions per second and only 7 transactions per second, accordingly). The only way that these numbers can be improved is if these blockchains work on their scalability.

From the point of view of interoperability, the largest projects which solve similar problems to Matic are ICON, Ark, Fusion, Aion, Blocknet (information regarding current market capitalization at the time of writing is taken from coinmarketcap.com).

Current market capitalization for the Matic Network is impossible to calculate as there are no details of the ICO or token available.

Digital technology is advancing at an incredible rate and with it comes the possibility of protocols that only a few years ago seemed impossible. From deep learning to machine learning, artificial intelligence and even the emergence of the internet of things (IoT), the scene is positively buzzing with developments. Within this ever-growing catalog of eye-catching innovations, DApps have emerged as one area to look out for.

It is usual to describe DApps according to a series of 4 core features. These are as follows:

Decentralized

Incentivized

Open Source

Consensus Mechanism

Potential impact of DApps on the global scene

DApps offer up pretty much the same benefits as a blockchain protocol in general but in a more sophisticated manner. A DApp is like a more streamlined blockchain protocol, offering a particular solution or set of solutions. DApps will generally bridge the gap between users and service providers across many business segments, without the need for third-party involvement.

We believe that the whitepaper has the following issues:

Planned marketing activities and plans for product promotion are not covered in the whitepaper, so it is impossible to analyze or draw relevant conclusions regarding potential market exposure.

There are no details regarding funding allocation or the use of proceeds.

6.2 Competitive landscape

We will use Porter’s Five Forces framework to perform an initial competition assessment for the Matic Network project.

Bargaining power of customers – Medium/Low

The key factor for an ecosystem like Matic Network is its popularity among both regular users and specialists. If it succeeds in attracting enough contributors, users and companies will have no other option but to use the ecosystem (and vice versa). We assess the bargaining power of customers as medium-to-low.

Bargaining power of suppliers – Low/Medium

Since there is only labor (developers) and expertise (and maybe node holders) on the supply side for Matic project, the bargaining power of suppliers can be assessed as relatively low.

Threats of new entrants - Medium

The threat of new entrants is medium, as all blockchain developers have to conduct their design and development activities at a high level of sophistication relative to security threats. The market is developing and there are not many major players at the moment; barriers for new entrants are relatively low.

Threat of substitutes – High/Medium

Threat of substitutes can be assessed as high to medium, as currently there are many competitors in the market, including those appearing in the market earlier, and subject to much hype to boot. However, if the project succeeds in attracting a sufficiently large audience and occupies its niche, then considering the fact that they are building their own ecosystem, which will include a mobile application, a desktop wallet and an extension for browsers, then developers/users may not wish to switch to any other platform out of convenience.

Industry rivalry:

As mentioned above, from the point of interoperability, there are several projects currently looking into solving blockchain problems via building decentralized platforms.

The core differentiation point for Matic Network is using an adapted version of the Plasma protocol that enables solutions for cheaper and faster transactions with a final result in the main chain.

MATIC NETWORK

ONELEDGER

ICON

ARK

Ticker

MTX

OLT

ICX

ARK

Project type

Blockchain service with wallet, payment APIs and SDKs

Blockchain service, Cross-ledger architecture with SDK

Blockchain ecosystem, aimd at combining all activities on a smart platform, SCORE

A cryptocurrency blockchain built as a derivate of Lisk, Crypti, and BitShares with unique differences and improvements to the DPoS algorithm

Token type

ERC-20

ERC-20

ERC-20

ERC-20

Algorithm

DPoS + Plasma

BFT, DPoS

Loop FT, staking

DPoS

Description of services and features

Matic is created to solve current blockchain problems with the use of Plasma, provides scalable and instant Ethereum transactions using side chains.

A cross-ledger agnostic protocol that enables high-performance scaling. It plans on providing businesses with a blockchain development solution, with which they aim to simplify the creation of a customized or niche blockchain for specific fields. Features: Smart Identity Management Platform, Blockchain Services, Chaincode Service, and a Programming Interface.

Mobile wallets, first iterations of testnet are released, other parts of future ecosystem are under development

ICO status

Not started

Ended

Ended

Ended

Funds collected as of ICO date/Hard cap)

Unknown/Unknown

USD 15 mln/ USD 15 mln

USD 42.7 mln/ USD 42.8 mln

USD 22 mln/ Unknown

Total tokens

Unknown

1,000,000,000

800,460,000

125,000,000

Token for sale

Unknown

35%

50%

75%

Valuation at ICO date (Hardcap/% of tokens for sale )

Unknown

USD 42.9 mln

USD 85.6 mln

Unknown

Market cap

Unknown

Unknown

USD 786.5 mln

USD 152.3 mln

As can be seen from the table above, all these competitors are building their blockchains on consensus algorithms.

BFT is the characteristic which defines a system that tolerates a class of failures belonging to the Byzantine Generals’ Problem. Byzantine failure is the most difficult class of failure modes. It implies no restrictions, and makes no assumptions about the kind of behavior a node can have (e.g. a node can generate any kind of arbitrary data while posing as an honest participant).

LFT (Loop Fault Tolerance) is an enhanced BFT 32-based algorithm that
promotes faster consensus and ensures finality of the consensus without the possibility of forks
within the network. LFT supports faster consensus by creating a group among trusted nodes. LFT can
accommodate diverse consensus structure by allowing such groups or nodes to freely determine the
number of votes.

Basic comparison of DPoS & BFT:

We think that the whitepaper has the following problems:

Absence of competitor analysis.

Icon is a headliner in the list of Matic’s competitors; it represents unique project using its own proprietary LFT consensus algorithm, offers more features at time of writing than most competitors, has established many powerful partnerships, and has a strong team of more than 100 employees.

One of the competitive advantages for OneLedger is its speedy implementation of blockchain technology in comparison to competitors; a set of universal tools for business and a well-developed marketplace (MVP) are planned to be publicly released in June, 2018). The project also benefits from a technically strong team, strong advisors and partners.

One of the key attributes of Ark is its speed of processing transactions on a blockchain. The team claims that Core Ark is configured to produce ultra-fast transactions with an eightfold block time - this is much higher than what Bitcoin, Ethereum or almost any other altcoin on the market can achieve, and thus gives the Ark a strong advantage over many more established coins. Another innovative feature of Ark is the democratic method of implementing the project. ARK provides a more decentralized voting system than other DPoS models.

From the information above, we can assume that if Matic manages to achieve all features and timelines declared, achieves good token performance, strengthens its team and attracts strong partners and is also be able to occupy a niche in the market, the project has a good growth potential, because, as we can see, competitors are highly capitalized and the market still needs solutions for the “trilemma”.

Team

Matic Network is a blockchain scalability platform which provides secure, scalable and instant transactions using DPoS side chains and an adapted version of Plasma. It appears technically complicated, and we’d like to draw attention to the fact that the ability of the team to deliver such a complex project can be witnessed, as a demo version has already been released.

On the current stage of the project only the core team is represented, other team members are still to be hired:

Jaynti Kanani

Anurag Arjun

Position

Co-founder & CEO

Co-founder & CPO

Total experience

5+ years

10+ years

Relevant experience

Yes (Software engineer)

Yes

Relevant education

Yes (Bachelor of Engineering)

Yes (Bachelor of Engineering)

Professional achievements

Creator of Smalleditor

No

LinkedIn

Yes

Yes

Connections

499

500+

Endorsements / Recommendations

No

Yes

Sandeep Nailwa

Position

Co-founder & COO

Total experience

5+ years

Relevant experience

Yes

Relevant education

Yes

Professional achievements

Co-founder & CEO of scopeweaver.com

LinkedIn

Yes

Connections

500+

Endorsements / Recommendations

No

Jaynti Kanani has solid experience in programming, but his lack of experience with projects related to blockchain is alarming.

Anurag Arjun has been a product manager for several Indian companies. His last place of work was IRIS Business Services, where he served as assistant vice president.

Sandeep Nailwal is the most experienced member of the team; he has extensive programming experience, and is currently focused on developing the Matic Network.

Within the public information available there are no details of any advisors for the project.

We also note that the Matic team hasn’t yet established a group of commercial partners and allies.

The only available information is that the Parsec Labs research team is collaborating with Matic Network and Decentraland to implement EVM generic fraud proof verification for Plasma nodes. Parsec lab enables on-chain scalability for game execution to open up and unite virtual worlds. Parsec lab partnership is one of many focused on achieving scalability with security.

If there was more available information, this would help with perception of reliability, and consequently the project's chances of attracting investors and achieving success.

Token analytics

Matic’s system functions as follows:

A user deposits crypto assets in a Matic contract on the mainchain (currently implemented with the Ethereum blockchain only)

Once deposited tokens are confirmed on the main chain, the corresponding tokens will be reflected on the Matic chain.

The user can now transfer tokens to anyone they want instantly with negligible fees. The Matic chain has faster blocks (approximately 1 second or less). In this way, the transfer will be done almost instantly.

Once a user is ready, they can withdraw any remaining tokens from the main chain by establishing proof of remaining tokens via a Root contract (a contract deployed on Ethereum chain)

It follows that MTX tokens are utility tokens required to use and participate in the Matic network.

Token price factor analysis

At this stage the token/ICO metrics and economy of the platform (size of commission, etc.) are unknown, so we can only discuss fundamental factors for the price:

Factor

Description

Price effect

Demand for the service

Matic Network strives to solve scalability and usability issues without compromising on decentralization, leveraging the existing developer community and ecosystem. Matic Network is an ​off/side chain scaling solution for existing platforms to provide scalability and superior user experience for Dapps/user functionalities.

The project strives to achieve a high degree of decentralization with trustless, decentralized execution whilst ensuring near-instant transfers, low fees and conducive economics for micro transactions. One of the key pillars of Matic Network’s ideology is user experience, which is currently very poor for blockchain applications. The Matic team has already built a high quality user experience.

⬆︎⬆︎⬇︎

Volatility of cryptomarket

One of the reasons for the popularity of the crypto market is its high volatility, which attracts investors preferring highly speculative investments. Many earning opportunities also contribute to the emergence of new crypto funds.

⬆︎⬇︎

Limited token supply

Assuming that the company develops as intended and the demand for the solution is more than sufficient, a limited token supply could result in long-term deflation of the token price.

⬆︎

Investment risk analysis

RISK

DESCRIPTION

LEVEL

Lack of information about token metrics and ICO details. Smart contract code not available on GitHub

Disclamer

We draw attention to the fact that the ICO details and token metrics are not specified in the white paper or on the project website. We understand that the smart contract code can be published only when the token metrics are known, but nevertheless, we draw attention to its absence at the time of writing. According to the team, they are currently focused on technical aspects of the project.

Absence of roadmap

The roadmap has not yet been released.

High

Advisors & established partnerships

Information on advisors and commercial partners/allies is absent

High

Team composition

The team’s composition still gives rise to questions ,as it is quite hard to believe that it is possible to develop such a technically complicated project with only three team members. They are still apparently hiring, but as there is no roadmap to date we can’t assume when it will be possible to estimate final team composition. Not all team members have enough blockchain experience either. Consequently this risk level can be assessed as medium.

High

MVP

At the time of writing (June, 2018) the first demo version has been developed, tested internally, and is available on GitHub. The beta hasn’t been audited; no comments from the public have been received, so risk level is assessed as medium.

Medium

Whitepaper is not comprehensive

We believe that the whitepaper has the following issues:

Absence of competitor analysis

Proposed marketing activities and plans for product promotion are not covered in the whitepaper, so it is impossible to analyze or draw relevant conclusions regarding potential market exposure.

Medium

Market/Commercial risks

Matic Network has no direct competitors in the market and the concept intended to be used has competitive advantages over those with similar approaches, but there are still many projects using a decentralized consensus mechanism and the “hype” around Matic is not high, implying a medium risk level.

Medium

Legal/commercial risks

The market niche for decentralized blockchain platforms in general bears little to no regulation risks. However as there is no available information regarding country of legislation, the risk can be assessed as Low.

Low

Token price decrease

There are no fundamental factors indicating that the token price will face significant pressure; information about the amount of funding raised during the private sale can be found on open sources, the number of tokens is unknown.

Low

The information contained in the document is for informational purposes only.
The views expressed in this document are solely those of the ICORating Team, based on data
obtained from
open access and information that developers provided to the team through Skype, email or other
means of communication.
Our goal is to increase the transparency and reliability of the young ICO market and to minimize
the risk of fraud. We appreciate feedback with constructive comments, suggestions and ideas on
how to make the analysis more comprehensive and informative.

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